Section 280G Payment Limitation Clause Samples
The Section 280G Payment Limitation clause restricts the amount of certain payments made to executives in connection with a change in control of a company to avoid triggering adverse tax consequences under Section 280G of the Internal Revenue Code. In practice, this clause typically limits or reduces severance, bonuses, or other compensation that could be classified as "parachute payments" if they exceed a specified threshold. By including this limitation, the clause helps both the company and the executive avoid significant excise taxes and the loss of tax deductions, ensuring compliance with tax regulations and preventing unintended financial penalties.
Section 280G Payment Limitation. Notwithstanding anything contained in any other provision of this Agreement or any other agreement or plan to the contrary, the payments and benefits provided to, or for the benefit of, the Executive under this Agreement or under any other plan or agreement which became payable or are taken into account as a result of the Change in Control and which are parachute payments for purposes of Section 280G of the Code (the “Payments”) shall be reduced (but not below zero) so that the Present Value of the Payments is equal to the Limited Payment Amount and no Payment is subject to the imposition of an excise tax under Section 4999 of the Code. Notwithstanding the foregoing, if the Net After-tax Benefit to the Executive resulting from receiving the Payments is greater than the Net After-tax Benefit to the Executive resulting from having the Payments reduced to the Limited Payment Amount, then the Payments shall not be reduced to the Limited Payment Amount. For purposes hereof: